No "Blue Light Special" For KMart - Retail Chain Pays $13 Million to Settle ADA Class Action Suit

In the first significant monetary class action settlement of its kind, Kmart Corp. agreed to pay $13 million to settle an Americans with Disabilities Act class action suit brought by mobility-disabled patrons. The agreement was made on March 13, 2006. Of the $13 million, $8 million is to be distributed in cash and $5 million in store gift cards. KMart also agreed to make significant changes to its stores in the next 7½ years in order to fully comply with the public accommodations requirements of the ADA. The class action affected customers in California, Hawaii, Massachusetts, New York, Oregon and Texas.

The allegations of the lawsuit were that KMart discriminated against persons who use wheelchairs. Members of the plaintiffs' class alleged that KMart provided insufficient parking for persons with disabilities, had counters that are too high for people with wheelchairs, failed to provide accessible check-out aisles for the mobility-disabled, that it did not provide accessible fitting rooms, that store aisles were blocked by merchandise, and had racks located too close together. Of the $13 million allotted for damages to disabled shoppers, $12.1 million was reserved for California residents as California's state law permits more categories of damages than other states. The remainder is to be distributed to mobility disabled residents of the other states in amounts ranging from $50 to $8,000 each, to be distributed in the form of cash and gift cards.

In addition to the $13 million in damages, KMart has agreed to pay attorneys' fees to the plaintiffs' attorneys in the amount of $3.25 million.

Generally, in these kinds of cases, plaintiffs will sue for an injunction seeking only an order that the retailer or other public accommodation provider cause its facility to comply with the ADA, and the plaintiffs will seek their attorneys' fees (although in California, plaintiffs are also entitled to monetary damages). In this case, KMart agreed to pay damages to their disabled consumers. More than likely, this decision was an economic one in which Kmart decided that it would be less expensive to pay the agreed amount than to have to incur the expense of trying the lawsuit. Although not yet approved by the judge hearing the case, it is expected that the settlement will be approved by the end of July of this year.

If you have any questions regarding any real estate legal matter, in San Diego please contact Brian Frasch (litigation) at bfrasch@gordonrees.com or Eric Young (transactions) at eyoung@gordonrees.com or call us at (619) 696-6700. In San Francisco, please contact Phil Wang (litigation) at pwang@gordonrees.com or Bruce Boyd (transactions) at bboyd@gordonrees.com or call us at (415) 986-5900. This Real Estate Update was prepared by Donna Cude of the firm's Houston Office. She can be reached at dcude@gordonrees.com or (713) 961-3366.